NEW YORK (DTN) -- Nearby delivered oil futures on the New York Mercantile Exchange settled higher Wednesday, rallying on the back of two key reports from the Organization of the Petroleum Exporting Countries and the U.S. Energy Information Administration that were bullish, raising their forecasts for global oil demand and cutting their supply outlooks.
"There has been too much focus on supply when in fact demand growth is the story," said analyst Phil Flynn at Price Futures. "Demand is exceptional and inventories are falling, so the bearish case has fallen apart."
He added, "We are approaching winter, which is a strong demand season and yet distillates supply is tighter than we've seen in recent years, so if we get a very cold winter, there could be a problem. The market will be more sensitive to geopolitical risks now that oil supply is getting evenly balanced with oil demand."
In its Short-term Energy and Winter Fuels Outlook, EIA projected world oil consumption for 2017 at 98.31 million bpd, revised up 52,000 bpd from the prior estimate published in September. The agency trimmed estimated U.S. production for 2017 by 100,000 bpd to 9.2 million bpd, with their non-OPEC supply estimate for this year revised down 170,000 bpd to 58.63 million bpd.
Earlier, OPEC raised its forecast for oil demand by 30,000 bpd projecting global crude consumption would increase 1.5 million bpd in 2017 from 2016. For 2018, OPEC sees demand rising by 1.4 million bpd, with the growth rate revised up 30,000 bpd from last month's outlook. OPEC said in its Monthly Oil Market Report that oil inventory held by the 35 countries that make up the Organization for Economic Cooperation and Development declined 6.0 million bbl to 2.996 billion bbl, with stocks 171 million bbl above their latest five-year average.
The only bearish data-point in the OPEC report was that production by members of the oil cartel rose in September by 88,500 bpd to 32.748 million bpd, with seven member nations led by Libya, Nigeria and Iraq boosting their output.
The market now looks ahead to weekly oil data due out at 4:30 PM ET from the American Petroleum Institute and late morning Thursday from EIA. A survey estimates the data would show stock draws across the board.
NYMEX November West Texas Intermediate crude oil futures settled 38cts higher at $51.30 bbl, off a $51.42 one-week high. December Brent crude on the ICE platform settled 33cts higher at $56.94 bbl, off a three-day high of $57.09. NYMEX November ULSD futures climbed 2.12cts to $1.7861 gallon and November RBOB futures advanced 1.77cts to $1.6092 gallon at settlement.
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